Huge Tax Break On Properties

Monique Vanek
27 July 2009

What you should know to transfer your property out of a company and get a 22% tax saving.

Seldom does the South African Revenue Service (Sars) open a tax-free window period, and rarely does it do it twice. So when it announced in a June draft amendment that individuals who own their primary residence in either a company, or a closed corporation (CC) can transfer their property tax free into their own name for the second time it came as a surprise and should be taken advantage of.

The draft amendment is likely to be finalised in the next few weeks, here's the lowdown.
All individuals who own their primary residence in either a company or CC can transfer their property into their own name without having to pay capital gains tax (CGT), transfer duty and secondary tax on companies (STC) from January 1 2010 until December 31 2012. This is a huge tax saving of just under 22%.

They can only do this if their domestic residence is exclusively used for domestic purposes, says Mike Teuchert, a tax partner at Grant Thornton. However, "no clarification has been given to the meaning of the term domestic purposes, although it would exclude the situation where a person also uses their residence for the purposes of running a part-time small business", says Teuchert.

Unfortunately the exemption does not apply to those who own their primary residence in a trust, as was the case in the previous window period, however this could change in the final draft, notes Deborah Tickle, a member of Saica's National Tax Committee.

Also if the property is not in your own name you can not take advantage of the exemption.
For those who transferred their properties out of a CC, or company after the 2001 window period and before this new one starts you will not be reimbursed, says Tickle.
Of course this exercise is not without costs, says Teuchert. You will still be responsible for costs associated with the transfer of you property, such as conveyancing fees and bond cancellation costs, reckons Teuchert.

So how do you go about transferring your property out of your CC or company? Firstly, you'll have to visit a conveyancing attorney to transfer your property, cancel your bond and register it in your own name. Secondly, you will need to make sure your books are in order and close them off. Thirdly, you will have to fill in a tax return and supply Sars with your latest set of accounts. Finally you will need to deregister your company with the Register of Companies, says Tickle.
Ntombikayise Baepi a senior associate at ENS reckons Sars has provided this second window period to cleanse the Register of Companies of inactive and dormant companies. Tickle says it has also done so to help individuals avoid the high costs of being a registered company when the Companies Act comes into full force next year.

Boost For Goose Valley Rentals

Katrina Olwagen, Rentals Manager for Chas Everitt International Property's on-site Goose Valley Office reports substantial interest for holiday rentals from the end of this year and through to March 2010. She has almost run out of stock and urgently needs more 2 bedroom 2 bathroom and 3 bedroom 2 bathroom Units to let. The Chas Everitt office at Goose Valley handles holiday and long-term letting, property management and sales of apartments. There is also an Internet facility available for residents and copy and fax facilities.

Katrina says that she receives more Goose Valley, Turtle Creek & Fairway Close rental enquiries because of the extensive advertising done by Chas Everitt, including having the only dedicated Goose Valley accommodation website http://www.goosevalleygolf.com/, as well as from the listings of all of her clients' properties on Chas Everitt's websites, such as http://www.everitt-plett.co.za/, http://www.chaseveritt.co.za/, http://www.chaseveritt.com/, http://www.chaseveritt.co.uk/, and up to one hundred other sites including http://www.cyberprop.co.za/

Chas Everitt Plettenberg Bay is a licenced real estate company, and is part of one of South Africa's largest real estate groups, is registered with the Estate Agency Affairs Board and is a member of the Institute of Estate Agents, the Plettenberg Bay Business Chamber and the Plett Tourism Association.

When clients deal with a registered agent they can rest assured knowing that all money received by the letting company is deposited into a trust account. The Trust Account must be audited within four months after the financial year end and the auditors must submit a report to the Estate Agency Affairs Board. Should the letting agent commit fraud the EAAB will compensate the client from its Fidelity Fund. It is a criminal offence for letting businesses and their staff to operate without being registered with the EAAB and letting agents must be qualified Estate Agents. It is also against the law for anyone other than an Estate Agent to let a property for gain unless it is their own. When you deal with a letting company ask to see their valid Fidelity Fund Certificate (FFC). If they don't have one - BE VERY CAREFUL, they may be spending your funds on a daily basis and could be closed down before you receive your money.

The best way to sell your property

Isn't it interesting how in these times we read that the best way to sell a property is by public tender or auction? The truth is that in a Buyers' Market it is only bargain hunters who attend auctions or submit tenders. Quite simply, they are the investors with cash and are looking for bargains. Auctions and tenders will only realise decent prices if the seller has a unique one of a kind property, such as the last piece of prime beachfront land.

I'll let you into a secret. The ONLY factor that sells property is PRICE! Price is relative to position, location, condition, age and other similar factors. If your property has not sold in the current market IT IS OVERPRICED. A few years ago there may have been 50 buyers in any month looking for property like yours. Today there are 20 buyers and they are comparing prices of all similar properties. If your property is overpriced it is compared to lower priced properties and those are the ones that are selling.

So, if you need to sell now, listen to a reputable Estate Agent and price your property competitively to sell in the current market. Estate Agents are not motivated to sell overpriced properties, but overpriced properties do fortuitously help them sell the better priced ones!

So what is the best solution? Deal with a reputable Estate Agent with a proven record of sales in your area, grant them a Sole Mandate and ensure that you receive a written marketing plan for your property. Make sure the mandate can be cancelled should the Agent not implement the marketing plan! Your Agent will then work hard on marketing the property, and spend money doing so, and is unlikely to accept a Sole Mandate appointment if the price is not market related.